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BRICS Bank to Make Debut With Green Bonds

The BRICS bank is to finally make its capital markets debut later this month by issuing green bonds in renminbi with the proceeds to be channeled into energy and infrastructure projects.

The New Development Bank, the multilateral lender co-owned by the governments of Brazil, Russia, India, China and South Africa, is preparing to issue $350m worth of debut green bonds denominated in China’s currency, the renminbi.

Sources with direct access to the Shanghai-based development bank told Emerging Markets that a green bond would be issued in late April, with the first loans disbursed in early May.

One loan would be issued to each of the five sovereign owners of the NDB, with capital being channeled into a single green energy or green infrastructure project. “The first five loan tranches will be apportioned evenly between the five BRICS countries,” said the source. “They want the first tranches to be as evenly distributed as possible.”

Developing countries from Latin America through to Africa and Asia are keen to push their green agendas: China’s next five year plan, from 2016-2020, aims to transition the People’s Republic to a low-carbon economy.

Now, there is a multilateral set up with the express intent to promote that agenda. “The great promise of the NDB is that it is launching directly into the sustainable infrastructure space, where it will lend directly to energy and infrastructure projects designed to have minimal impact on the environment,” said Kevin Gallagher, co-director of the Global Economic Governance Initiative at Boston University.

“It remains to be seen how the new institution will be scaled up and how oversight will work, but this is a great first step.”

He also pointed to the new multilaterals’ aim of extending its founder members an equal say in how it is run, and to whom and how it lends. “Every BRICS government has the same 20% share of the multilateral, so they all have the same level of say in how it is managed. Other development banks may be run by China or the United States, but this one is equally democratic.”

In March, the NDB’s president, K.V. Kamath, a former chairman of Indian IT giant Infosys, said he was waiting for Chinese regulatory approval to sell around $1 billion worth of long-term RMB denominated bonds.

The NDB has mooted lending to Brazil in real and to South Africa in rand due to the volatility of those two nations’ currencies.